Finding an economist opposed to Australia’s mass immigration ‘Big Australia’ policy is a difficult task. There’s me, Judith Sloan, Ross Gittins, Gareth Aird, Henry Ergas and now Stephen Koukoulas (aka ‘The Kouk’) who has penned an excellent article today as Business Insider:
There are many instances where the dismal science of economics embarrasses itself with the way the economy and its parts are measured relative to the lived experience of the general population…
[This] fits well with much of the current discussion on Australia’s population growth.
The bottom line GDP numbers look great, with 27 years and no recession.
This is a remarkable achievement. Well done, Australia.
RBA Governor, Dr Phillip Lowe recently noted that high levels of immigration continue to give Australia a young and skilled workforce…
This means that all we need to grow the economy is have lots of young, skilled and relatively rich people to migrate to Australia, year in and year out, and the bulk of our economic problems will be solved.
Unfortunately, this simplistic attitude is not that clear cut for reasons people reading this on the bus, stuck in traffic, will well understand.
The wonderful 27 year GDP growth record of Australia and Dr Lowe’s assessment about the desirability of high levels of immigration are, to a significant extent, simply a reflection of more people being here…
It doesn’t automatically mean that everyone is better for this extra GDP. There is nothing clever or innovative about it.
Australia’s GDP enhancing high population growth is coming at a cost of things not well captured, if at all, in the GDP data or measures of individual well-being.
Missing are things like the time spent sitting in congested traffic in competition with other drivers trying to go to work to earn the money to service a massive mortgage that is needed because of strong demand for housing from hundreds of thousands of new immigrants pushing prices higher. These are the consequences of population growth outpacing the supply of houses, transport, other infrastructure and social services.
The unmeasured but still very real costs of a shortfall in funding for schools and health care facilities, that are stretched as more and more people compete to use those services relative to the ability of the government or private sector to ramp up supply of those services are other costs…
In a decade or so from now, Australia’s population will likely rise to 30 million or so, from today’s level around 25 million. These extra people will, undeniably, add to GDP and growth through their work and spending patterns.
But how will the economy cope with these 5 million extra people, competing to use the same roads, buses and trains and competing to buy or rent the stock of dwellings?…
Suffice to say, there is a case at the moment for trimming the rate of population growth to allow for the infrastructure to catch up to the number of people living here. This might mean a scaling back in various components of the current level of immigration, excluding the humanitarian intake for what should be obvious reasons…
Well said. The Productivity Commission’s (PC) recent Migrant Intake Australia report noted that GDP is a “weak” measure of economic welfare and called for a broader assessment that captures the costs:
While the economywide modelling suggests that the Australian economy will benefit from immigration in terms of higher output per person, GDP per person is a weak measure of the overall wellbeing of the Australian community and does not capture how gains would be distributed among the community. Whether a particular rate of immigration will deliver an overall benefit to the existing Australian community will crucially depend on the distribution of the gains and the interrelated social and environmental impacts.
The PC also doubted the current turbo-charged migrant intake is optimal:
A positive rate of immigration that is within Australia’s absorptive capacity and oriented towards young and skilled immigrants is likely to deliver net benefits to the Australian community over the long term.
However, there are various weaknesses inherent in current processes surrounding immigration policy decision making, particularly in terms of their ability to take into account broader and longer-term considerations (chapter 3 and finding 3.1).
Taken together, these issues raise questions as to whether, without changes to increase Australia’s absorptive capacity, the annual intake (which is currently at
historically high levels) is consistent with achieving a population that at least sustains (and over time maximises) the wellbeing of the Australian community.
As noted by Ross Gittins recently, “our economists have turned off their brains on the question of immigration”.
Sadly, this criticism extends to the upper echelons of Australia’s economics establishment, from the RBA to the Treasury and throughout academia.
